Bruce Fallick and Pawel Krolikowski
Federal Reserve Bank of Cleveland
We examine persistence in employment-to-population ratios among less educated individuals in excess of that implied by persistence in aggregate labor market conditions, using state-level data for the United States. Dynamic panel regressions indicate only a moderate degree of excess persistence, which dissipates within three years. We find no significant asymmetry between the excess persistence of high versus low employment rates. The cumulative effect of excess persistence in the business cycle surrounding the 2001 recession was mildly positive, while the effect in the cycle surrounding the 2008–09 recession was decidedly negative. Simulations suggest that the lasting employment benefits of temporarily running a "high-pressure" economy are small.
JEL Codes: E24, J21, J24.